S&P Downgrades Metris

Standard & Poor’s Ratings Services placed its ratings on various Metris Master Trust-related transactions on CreditWatch with negative implications (see list).

The CreditWatch placements reflect the adverse performance trends displayed by the Master Trust collateral, consisting of VISA and MasterCard credit card receivables.

The Metris Master Trust has displayed deteriorating performance trends during the past two years, but the deterioration has been more pronounced during the past six months, as the trust has reported increased delinquency and charge-off rates. These Metris Master Trust-related transactions have benefited from a lower interest rate environment, but the lower base rate costs have not been able to wholly offset the trust’s increased charge-off rates. As a result, despite having a lower cost of funds, the excess spread levels for the trust have dropped.

As of the October 2002 reporting period, the total delinquency rate was 11.14%, which is significantly higher than the 9.23% average total delinquency rate experienced during the past two years. The average total delinquency rate has risen to 8.73% in 2001 from 8.03% in 2000, and has averaged 10.16% in the first nine months of 2002. Also, the charge-off rate has increased to a current level of 16.47%, up from the two-year average of 13.82%. The trust charge-off rate has increased to 13.16% in 2001 from an average of 11.29% in 2000, and has averaged 15.43% thus far in 2002. Furthermore, the increased charge-off rate has negatively affected excess spread rates, causing excess spread levels to fall from their two-year average of 7.16% to a current three-month average of 6.03%.

The current payment rate of 6.83% is in line with the historical payment rate for this trust. In addition, the trust yield has remained stable, averaging between 26.00% and 27.00% during the past few years.

Standard & Poor’s will complete a detailed review of the credit performance of the aforementioned Metris Master Trust relative to the remaining credit support in order to determine if any rating actions are necessary.

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RATINGS PLACED ON CREDITWATCH NEGATIVE

Metris Master Trust
Series 2000-1

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Master Trust
Series 2000-2

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Master Trust
Series 2000-3

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Master Trust
Series 2001-1

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Master Trust
Series 2001-2

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Master Trust
Series 2001-3

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Master Trust
Series 2001-4

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Master Trust
Series 2002-1

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Master Trust
Series 2002-2

Rating
Class To From
A AAA/Watch Neg AAA
B A/Watch Neg A

Metris Secured Note Trust
Series 2000-1